Supplemental/Special Needs Trusts

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properly established and maintained Special or Supplemental Needs Trust will shelter (exclude) the assets held by the trust for purposes of Medical Assistance eligibility. Supplemental and Special Needs trusts are only available for people who have a certified disability. Whether a trust is a supplemental needs trust or a special needs trust depends upon whose assets are placed within the trust estate.

Special Needs Trusts

A special needs trust is created only with the funds of the disabled trust beneficiary. For example, a special needs trust can be used to shelter the proceeds of a personal injury settlement payable to a person with a disability who also needs Medical Assistance or other government benefits.

The criteria for a valid special needs trust include:

The trust must be for the “sole benefit” of the disabled beneficiary.

The beneficiary must be under age 65 at the time the trust is created.

The trust remains in force and assets are excluded after age 65, but additions made after age 65 will be treated as asset transfers which potentially cause a period of ineligibility.

The beneficiary must be certified as disabled at the time the trust is created by Social Security criteria or by a State Medical Review Team.

The trust must be created by a parent, grandparent, guardian or court.

The trust must provide that the trust estate will be used to supplement and not take the place of public benefits for the beneficiary.

The trust must contain a provision directing the trustee, at the time of the beneficiary’s death, to repay the State for Medical Assistance benefits paid on behalf of the beneficiary.

Pooled Special Needs Trusts

Pooled Special Needs Trusts are established and managed by a nonprofit organization. There is no age limit for participation in a pooled trust, but a Pooled Special Needs Trust must still meet the following conditions:

The beneficiary must be certified as disabled at the time the trust is created by Social Security criteria or by a State Medical Review Team.

A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

Accounts in the trust must be established solely for the benefit of the disabled individual.

The Trust Account can be established by the parent, grandparent, or legal guardian of the disabled person, by a court, or by the disabled person him or herself.

To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust must reimburse the State for all Medical Assistance paid on behalf of the beneficiary. If the pooled trust will keep the money following the beneficiary’s death, those funds do not need to be reimbursed to the State and can be used to benefit other disabled individuals.

Supplemental Needs Trusts

A supplemental needs trust is created by, and with the funds of, someone other than the trust beneficiary, his/her spouse, or anyone with a legal obligation of support or reimbursement to the beneficiary. For example, a valid supplemental needs trust will be created by the parents of an adult child who is disabled to supplement that child’s public benefits rather than giving money to that child which would cause him or her to lose Medical Assistance benefits. The criteria for a valid supplemental needs trust also include the following:

The beneficiary must be age 64 or younger.

The beneficiary must be certified as disabled at the time the trust is created by Social Security criteria, by a State Medical Review Team, or by two physicians qualified to diagnose the beneficiary’s illness.

The trust must be for the “sole benefit” of the disabled beneficiary.

The trust must be set up on or after July 1, 1992, but the trust does not need a provision to reimburse the State as required in a special needs trust.